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Fran�ois Jooste, a game tester for Magmic, an Ottawa-based mobile game developer. (Blair Gable For The Globe and Mail)
Fran�ois Jooste, a game tester for Magmic, an Ottawa-based mobile game developer. (Blair Gable For The Globe and Mail)

Business

RIM's split personality strategy Add to ...

Pop mega-star will.i.am stood before a crowd of about 3,000 in Orlando this week in his oversized sunglasses and white sport coat, looking oddly out of place.

This was no audience of concert-going teenagers. These were attendees at Research In Motion Ltd.'s biggest annual conference for its most important corporate clients. The guest list included the top brass from the World Bank, lawyers from one of the largest mergers and acquisitions law firms in the United States, and major customers from Egypt to Brazil. And after the Black Eyed Peas front man finished stumbling his way through a strange three-minute, stream-of-consciousness talk on the BlackBerry and the future of music - "Trumpets connect people, so does this phone, on a totally different level," he said at one point - who should follow him? Buttoned-up executives in suits from Hewlett-Packard and Oracle, who delivered speeches about health-care technology and cloud computing for businesses.

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Such is the split personality of the new RIM, Canada's most important technology company and by some measures one of the fastest-growing major companies in the world. From its base in Waterloo, Ont., co-chief executive officers Michael Lazaridis and Jim Balsillie built what is now a $15-billion business by offering businesses and government departments what was essentially a super-powered pager with a phone attached. Corporations adopted the BlackBerry because it made them more productive, and ushered the era of the 24-hour employee.

But in 2006, after creating perhaps the most important business tool since the personal computer, RIM began targeting the then-burgeoning consumer smart-phone market with the release of the BlackBerry Pearl. A year later, Apple Inc. introduced its now-ubiquitous iPhone, and the market for such high-end mobile devices has since exploded.

Though BlackBerrys make up five of the top 10 best-selling smart phones in North America, Apple's products garner most of the popular attention, and the launch of the iPad tablet computer has given the California company a huge shot of momentum. That has led many tech analysts to wonder how RIM plans to ensure the iPhone doesn't ultimately win the war for consumers' wallets, particularly as wireless consumers begin to lean toward phones that can offer many small software applications, or apps: There are more than 25 times as many apps for the iPhone as there are for RIM's BlackBerry.

This week in Orlando, RIM's executives gave perhaps the clearest explanation yet of what the company intends to do: everything Apple's not doing. It is no longer about playing catch up in the apps race. It is about playing a different game altogether.

While Apple's focus is squarely on the consumer, RIM is building its consumer strategy around the same things that made the BlackBerry a corporate addiction: security, low power consumption and efficiency. While Apple controls the means of downloading applications for its phone, RIM allows downloads through myriad channels, such as third-party websites, giving developers more freedom. While Apple regularly boasts about the number of iPhone applications available - somewhere north of 185,000 - RIM, which boasts just 6,500 apps, is now pushing quality over quantity, focusing on professionally designed applications that make full use of the BlackBerry's many functions, something Mr. Lazaridis defined this week as a "super-app."

In essence, if Apple wants to be the Holiday Inn of the wireless application world, RIM's new focus is trying to become the Four Seasons. The challenge that will ultimately determine the company's future is whether it can woo enough consumers without sacrificing the corporate clients on which it built its reputation and its business model - whether it can strike a fine balance between the boardroom and the Black Eyed Peas.





FIGHT FOR CONSUMERS

On the surface, the BlackBerry Messenger app is a simple thing. It lets users exchange quick messages over their smart phones. Teens like it because it's fast and cheap. Professionals like it because it's secure and allows them to share information in groups. Often, applications don't work well together on smart phones - a user's calendar may not be able to use the e-mail app to send a user a notification e-mail about a coming appointment, for example. But Messenger, like most of RIM's high-end apps, works seamlessly with its cousins.

BlackBerry Messenger is exactly the sort of app on which RIM is staking its future - a well-built piece of software as popular with consumers as it is with enterprise clients.

According to RIM, more than 20-million people use Messenger. Brokerage firm Morgan Keegan estimates usage is up 500 per cent in the last two years, and 100 per cent in the last 100 days. In surveys, a significant percentage of people cite the software as a reason for buying a BlackBerry in the first place.

Many of the services designed for RIM's devices are aimed squarely at businesses. (Indeed, one of the highlights of the Orlando event was HP's newly announced software that lets users print documents from their BlackBerrys wirelessly.) But there are also developers working on magazine-reading, video and music apps - a significant presence, given that the conference is supposed to be all about corporate clients.

It has taken time for RIM executives to get comfortable with the consumer world, say people in the software application business. "For a long time their focus was solely on enterprise and selling devices into companies, so the idea of games being developed for the platform was scary to them," John Criswick, founder of Magmic, an Ottawa-based mobile game developer, said in a recent interview. "They weren't ready to make the leap."

Now, he adds, that's no longer a problem. Since launching App World, its application distribution service, RIM has opened up considerably to more consumer-oriented apps.

But most developers agree that building apps for the iPhone is still more straightforward than for the BlackBerry. For one thing, there's only one iPhone, but multiple BlackBerrys with different screen sizes and processing power, meaning developers have to build different versions of their BlackBerry software.

However, RIM's devices also offer developers some often-unacknowledged advantages - for example, the ease with which developers can access its many functions, such as e-mail and the built-in calendar.

And when it comes to the technical side of the smart-phone wars, RIM has a significant lead over many of its competitors, thanks in large part to its corporate upbringing. Since the device's inception, the BlackBerry has functioned primarily as an efficiency tool, a trait that extends to its engineering and design.



For example: The BlackBerry uses less bandwidth than just about any other smart phone on the market. RIM phones download only as much information as needed, rather than e-mails and files in their entirety up front. Data largely runs through RIM's own servers - a decision initially made to keep corporate and government data secure, but one that is now paying off by taking the load off the wireless carriers. Some analysts note that RIM's biggest advantage in the smart phone wars isn't the BlackBerry, but the underlying technology supporting it.

That advantage becomes more important as users migrate from traditional "talk and text" cell phones to smart phones that consume far more data via web sites, applications and multimedia.

Carriers such as AT&T have already felt the implications of the smart phone surge. The American telecom provider suffered well-publicized and embarrassing network slowdowns late last year, partly to the sheer weight of iPhone bandwidth usage. Calls get dropped and wireless web surfing slows down.

As more users opt for more powerful devices, carriers will only suffer more. By some estimates, about half the cell phone users in North America will carry smart phones within the next two years. That gives telecom providers a built-in incentive to promote RIM's phones - often paying subsidies to steer customers toward the BlackBerry - because they cause less of a network strain.

What's not clear is how much that advantage will matter in the long run. Wireless carriers may simply decide instead to spend the billions necessary to upgrade their networks to handle all the new traffic. Estimates of just how much mobile traffic will grow are varied, but none are small. Cisco Systems, for example, estimated that worldwide mobile traffic will double every year between 2009 and 2014.

And hidden within these statistics are other factors that don't bode well for RIM. For one thing, a lot of the pressure on carriers will come not from smart phones, but from the fast-growing ranks of wireless-enabled tablets, netbooks and other mobile computers. Because of their faster processors and bigger memory, these devices tend to consume much more data - and unlike Apple, which began selling its iPad tablet computer this month, RIM has no device in that market.

Perhaps more worrying for RIM is the kind of data that's spurring mobile bandwidth usage. Overwhelmingly, video and multimedia content is driving usage, as consumers use their smart phones to watch sites such as YouTube. Using data from Rogers Wireless, analysts at Sanford C. Bernstein estimate that BlackBerrys use a tenth of the bandwidth used by an iPhone for a text e-mail, and about half the bandwidth of an iPhone for an average web page. But when it comes to video, the two devices use exactly the same amount of bandwidth - RIM's efficiency advantage becomes moot.

Different, but the same

There is, however, no shortage of confidence on RIM's part that its can still translate whatever technological edge remains into consumer success - even if it is at a sizable marketing disadvantage compared to Apple. This week, even as rival handset maker Palm Inc. was raising the white flag by selling out in a desperation deal to Hewlett-Packard, Mr. Lazaridis strode onto the stage that will.i.am later occupied and told an audience of his biggest customers that RIM wants to put BlackBerrys in 100-million peoples' hands - more than double the 41-million currently using the devices.

"As excited as I am about what we've accomplished so far, I'm even more excited about where we're going tomorrow," he said, sounding nothing like a man whose company has also considered selling to the highest bidder, as Bay Street rumours have suggested from time to time.

"Everyone in this audience - IT professionals, developers, carrier partners - you're all here today because of the vast opportunity RIM provides."

To get to 100-million customers, RIM needs to mimic its dominance in the corporate world to the consumer world, especially in emerging markets such as China - and it needs to do this at a time when smart-phone competition is growing. HP's Palm purchase sets the stage for another tech industry heavyweight to join RIM, Google, Microsoft and a host of others in the fight for mobile supremacy.

That's why RIM's sights appear set on attacking the consumer market with a strategy that disrupts its bread-and-butter enterprise business as little as possible. In the past year, the company has systematically gone about updating some key areas in which it lags behind competitors, including the BlackBerry Web-browsing experience and user interface. Indeed, perhaps the two biggest announcements at a conference aimed at corporate clients were the launch of a new consumer-oriented Pearl phone and the upcoming release of BlackBerry 6, an operating system with upgraded graphics and a better web browser.

"As they ramp up efforts to target the consumer market, they really have made a strong effort to update the front-end software - from browsing to (user interface) to bundled and downloadable apps," says Ronald Gruia, principal analyst at Frost & Sullivan.

"Traditionally, people looked at the user interface and said yes it's reliable and functional, but it essentially has been the same for a good number of years," he added.

"They are working on this." Correction: A chart accompanying a story in Saturday's Report On Business incorrectly listed Research In Motion as fifth among phone-makers in terms of units shipped during the first quarter of 2010. Data from IDC shows RIM was fourth, with Sony in fifth place.

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